Family Finance Guide

Tips about Corporate Financial Management

What exactly is financial management? Basically, it refers to the management of finances in a business, corporation or organization with the sole purpose to achieve particular financial objective. Among some of the most common financial objectives are to increase the organization’s earning, focus on returning cash of shareholders and generate sufficient return on investment by taking into consideration the risks posed to the business.

To manage finances in corporation, there are three elements/stages in the process – planning, controlling and decision-making. To begin with, financial planning is the most crucial stage as it will affect the outcome in end-stage. Before the experts plan some winning strategies or tactics, the management must ensure that the funding is sufficient to support the business. On top of that, it is advisable to set aside additional funding as a safety precaution. The funds are needed to buy stocks, settle salaries for employees and handle any business crisis. In certain cases, additional fund is needed to make acquisitions or expand the business. Therefore, management should plan accordingly by allocating sufficient funds before progressing to the next stage.

Next up, management must understand the importance of controlling the finances to ensure smooth progress of activity that will help elevate business to achieve the objectives. Generally, financial control must be able to address some of the most important issues such as security, efficient used of assets and execution of activities that will benefit the shareholders.

Finally, after planning accordingly on how to control the usage of finances in the business, it is the right time for decision-making in relation to investment and dividends. Most of the time, corporations or organizations prefer internal financing as it is more convenient when the management draft out activities according to existing budget. However, in other situations, alternative financing is also useful as it may eventually help in acquisition and business expansion.

Among some of the most common alternative financing are selling corporations’ shares, borrowing from financial institutions and requesting credit from suppliers. At this stage, management must also determine if the profits and earnings of the business should be retained or divided evenly among shareholders.

Tips for financial management

Bear in mind that everyone in the company especially managers and leaders in various departments play an important role in financial management. Thus, do not let go believing that financial controlling and other areas are something the accounts team are responsible for. Well, if you have no idea on how to manage finances effectively, here are some practical tips to guide you.

To start with, get yourself involved in planning and allocating the budget for activities and strategies. Besides setting appropriate budget, work out on other areas such as delegating temporary staffs for vacancies, identifying capable staffs to deliver and achieve sales target and determining on investment of new facilities for the company. In addition, you need to make your assumptions and predictions clear among co-workers. Obviously, when you plan or set a budget, it must be based on some predictions. Ensure that you present the predictions or assumptions about sales growth in the next six months or price inflation clearly.

Nevertheless, account team knows the best about your company’s financial situation. Therefore, it is advisable to work together with the accountant because they can explain in-depth on the performance of the business and how to improve it throughout the year. Besides, these accountants can help you to get a clearer picture of sales growth based on your assumptions presented to co-workers. By interacting regularly with accountants, you can be prepared to face the risks should problems arise within the company.

One of the most important tips for all managers and leaders is to learn to trust your team members. After all, your success depends very much on their cooperation and hard work. Share your insights and assumptions with the rest of the team to ensure that they understand clearly your objectives to be able to achieve the best result. The key to success here is communication.

Last but not least, spend some time to observe the performance before taking a follow-up action. Monitoring the performance and changes is utterly important because eventually, it will affect or determine the outcome. For instance, if things aren’t progressing as what you would have expected, amend the plans or strategies and make some changes to suit your budget.

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